BUCK Offers A 7.55% Yield, But Don't Ignore The Competition
Simplify Treasury Option Income ETF offers a 7.55% yield via option spreads and a portfolio of short-term Treasuries. BUCK has outperformed the Treasury bill benchmark by 60 bps annualized since inception, but with higher drawdowns (5.4%) and some capital erosion. Among bond and options income ETFs, CSHI provides a more stable asset value, much lower volatility, and slightly better total return despite a lower yield.
BUCK: Misleading Effective Duration
Simplify Treasury Option Income ETF (BUCK) is marketed as a cash-plus, ultra-short duration fund but carries significant hidden interest rate risk. BUCK's effective duration is 4.98 years, far above category peers, exposing investors to potential -5% losses from a 100 bp rate move. The fund generates a 7% distribution rate, with 2.5% from option premiums, but this extra yield is not justified by the increased risk.
BUCK: Alternative To Cash On Steroids
Simplify Treasury Option Income ETF offers monthly income by combining ultra-short US Treasuries with a systematic options-selling overlay. BUCK's strategy limits interest rate sensitivity and credit risk, making it a potential alternative to cash or core fixed income for income-focused investors. Current macro conditions, including the 25-bp Fed rate cut and a stable SOFR–IORB spread, support continued robust income generation for BUCK.
Protect Your Bucks By Selling BUCK (Rating Downgrade)
Simplify Treasury Option Income ETF aims to provide monthly income by combining Treasury holdings with an options strategy, positioning itself as a cash alternative with yield enhancement. The ETF has underperformed traditional cash vehicles, posting a negative Sharpe ratio and high volatility, failing to meet its stated objectives. BUCK relies on portfolio manager discretion for rates trading, resulting in hedge-fund-like risks without delivering superior returns or transparency.
BUCK: Potential Yield From Short Durations. But At What Cost?
A Short-Duration ETF with an Options-Based Yield Boost: Just What We Needed? Yes, but not to be confused with true cash alternatives; here, risk amplifies with volatility. The options strategy boosts the yield above 8%, with monthly returns, over 70% in the form of ROC, but beware of the total return.
BUCK The Trend 2.0: Seek Attractive Yields Without Chasing Credit Risk
U.S. Treasury Bill yields have been trending lower since last July as interest rate cuts started to be priced into the market. The Simplify Treasury Option Income ETF is a yield-enhanced Treasury Bill fund. This ETF looks to maximize Treasury Bill total returns while targeting a duration of one year or less and additionally looks to enhance yield via structural alpha by selling options on Treasuries. In our view, option-based convexity risk is much more compelling than credit risk right now given that the MOVE Index remains elevated and credit spreads are very tight.
BUCK: This Is Not A Cash Alternative (Rating Upgrade)
I initially rated BUCK as Sell due to volatility and unpredictability, but new information regarding BUCK's operational strategy prompted me to upgrade my rating. BUCK offers 2-3% higher yields than short-term US treasuries, making it a viable high-yield bond alternative with lower volatility. Though it's still not suitable as a short-term cash alternative, income investors can appreciate BUCK's higher income and lower volatility compared to traditional high yield bonds.
I'm Seeking Up To 8% Yields For My Cash, Here Are My 3 Favorite ETFs
As clients inquire about next year's income, I recommend three favorite income funds to include in their portfolios. These funds are designed to generate reliable income and are primarily non-equity based, offering diversification. The funds have been selected based on their performance, stability, and potential to provide consistent returns.
BUCK The Trend: Seek Attractive Yields Without Chasing Credit Risk
Treasury Bill yields have been declining due to anticipated interest rate cuts, prompting investors to seek alternatives to money market funds. BUCK's strategy leverages high demand for Treasury options to generate additional income, focusing on convexity risk over credit risk. Investors seeking a cash alternative with higher total returns and minimal credit risk should consider BUCK, despite accepting some volatility.
BUCK: The Risks Have Not Paid Off
BUCK's option writing strategy has not consistently outperformed U.S. treasuries, despite the higher volatility and risk. The fund's NAV decline and tie to SVOL raise concerns about its long-term viability and investor interest. Consider alternatives like covered call equities for similar yields and higher total returns or U.S. treasuries and CSHI for lower volatility.
BUCK: Harvesting Interest Rate Volatility Premium To Boost Treasury Returns
The BUCK ETF is marketed as a cash replacement tool. It writes options on interest rate indices and bond futures to boost treasury returns. BUCK's 1-year total return of 6.3% is comparable to JPST but it exhibits higher price volatility than comparable cash replacement funds. I personally prefer JPST and JAAA's modest credit exposures, as credit markets are relatively easier to monitor.
BUCK: Income ETF Focusing On T-Bills And Options, Ineffective Strategy
BUCK focuses on short-term treasuries and uses option strategies to boost income. The fund has a 6.8% dividend yield and relatively low risk and volatility compared to other bond sub-asset classes. However, BUCK's strategy has not been effective in the past and has underperformed t-bills since inception.
